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Avdiivka Coke CEO: It's been a long time since I felt so depressed

30.03.2017

Trade blockade of Donbas has affected Avdiivka Coke and Chemicals Plant as well. In his interview for Deutsche Welle, Avdiivka Coke CEO Musa Magomedov, tells us how the company is working now.

Avdiivka Coke and Chemicals Plant is a part of Metinvest Group of which Rinat Akhmetov is the majority shareholder. His businesses are located on both sides of the contact line. Before the conflict, Avdiivka Coke consumed the coal that was produced in the non-government controlled area. However, the trade blockade put a stop to the supplies.

DW: Mr Magomedov, could you please tell us how the warfare escalation and blockade have affected the plant?

Musa Magomedov: Our shops No.3 and 4 are idle, the chemicals shop is down as well. Our desulfurisation system is out, and this is also very bad. There is a number of reasons behind it. Firstly, we are short of electricity that comes to the plant from one of four inputs only. Secondly, we have problems with coal quantities and structure, as there are no more supplies of coal from the rebel-held territories. Ukrainian coal was much cheaper than US and Australian coal that we also use. Therefore, our prime cost is worse, affecting the production of the steel industry. As a result, we have to operate at a 50% capacity, producing 5,000 tonnes of coke a day instead of possible 10,000.

What impact does this situation have on employees?

We used to produce 8,500 tonnes a day before the conflict. The situation has changed. We have idled some employees. It means that we continue to pay two-thirds of their salaries, although they are not working now. So far, we have idled only 200 employees out of 1,000 people included in the list. Other 800 workers are doing repairs. Now we are in need of repair works. However, as soon as the work is done, we may have to idle more people. The time when we can resume full operations depends on the two problems I've mentioned: the prime cost and repairs of electricity transmission lines. We had four electricity inputs, but since the conflict escalation this February, we have had the chance to repair only one. The repair permission depends mostly on the other side (NGCA — Editor's note).

When we talked to you last autumn, you said that you used US and Australian coal in production processes. Was it because of unstable supplies from the separatist-controlled areas? How are you handling the situation now?

No coal comes from the NGCA at all. Once the blockade started, the supplies stopped totally. The last supplies from those territories were used as back as in February. Certainly, this affects our prime cost, which in turn has an impact on the steel industry.

You have always stood against cancellation of trade with the NGCA. Have you remained of the same mind?

We are very sorry that it happened that way. The "blood trade" slogan is irrelevant, as the other side does not buy weapons with the money earned in the coal industry. They receive weapons for free. When we bought coal from, let's say Krasnodonvuhillia (located in NGCA — Editor's note), we realised that the money was spent on salaries and equipment only.

Soon after the railway lines blockade with the non-government controlled areas began, the Ukrainian government actually legalised these actions. Do you agree with this decision?

To be honest, I don't understand these actions of the President. I feel that we've given up the last islands of Ukraine with such actions. I was always optimistic about the reintegration of Donbas, but now I have fewer hopes. I believe that Ukraine has lost some more supporters in the non-government controlled areas. It looks like we are steadily moving towards the Transnistrian or Abkhazian scenario. The blockade has killed the last chances that we had due to the Minsk agreement. Our government has shown a lack of character. I have never been so pessimistic, even during the most severe shelling of the town and the plant.

Can this situation mean that the plant might shut down?

The plant can stop any time, and today we are at the breaking point again. There are several places that can cause the plant to stop forever if hit directly. We were fairly lucky because we could save the situation three times when the plant was on the verge of a complete shutdown because of the shelling. I'd like to remind that the plant provided heating to the town during the most difficult times. It cost us around UAH 2 million per day. We have no technical problems with power line rebuilding, we have a problem with access. Our repair crews have restored power lines more than

200 times since the hostilities broke out. As to profitability, our company still supports us. We must understand: if we shut down, a new plant will never be built.